The view from London - the week ahead

Trump meets Juncker – 25/07 – it should be an interesting meeting between the teetotal President Trump and President of the EU Commission Jean Claude Juncker, who it has been rumoured does like the odd tipple, when they meet at the White House on the 25th July this coming week. Subjects on the agenda are likely to be trade at a time when the US President has called the EU a “foe” and the EU Commission has promised to push back on the US President’s threats to impose a tax on all imports of cars from the European Union. The dynamic will be doubly interesting given the President’s threat to impose tariffs on all Chinese imports to the US, as well as his tweet storm about the EU and China manipulating their currencies to improve the competitiveness of their exports.

ECB rate meeting – 26/07 we’re not expecting any surprises from this week’s ECB rate meeting coming as we do off the back off last month’s decision to taper the asset purchase program by the end of this year. The main focus is likely to be on when we can expect to see the ECB clarify its guidance on when to expect the first rate hike with speculation varying between on the end of Q3 next year, a time that has been euphemistically described as the “end of the summer” or whether we’ll see one in Q2 or at the end of Q4, after President Draghi’s term at the helm of the bank has expired.

US Q2 GDP – 27/07 – the January tax cuts appear to have helped light a fire under the US economy with retail sales rising for five months in a row, despite another two rate rises already this year, while unemployment recently dipped below 4%. The recent Fed minutes highlighted that the economy continues to look strong and this week’s first iteration of Q2 GDP could well see a number come in at a fairly lofty 4%.This is likely to reinforce expectations around a September rate hike, which given President Trump’s recent tweets about the strength of the US dollar isn’t likely to be well received.

Germany and France flash PMI’s – 24/07 – recent PMI data appears to show that the manufacturing sector has been struggling since the beginning of the year. While the numbers still remain broadly positive there is a concern that we might see further weakness in the months ahead, amidst talk of trade wars and tariffs. Services on the other hand has been showing signs of finding a base with a rebound in both Germany and France in June. With the World Cup in full swing and with France having won it the French services sector could well see a another boost, as it continues to outperform Germany who went home early.

Sky - FY18– 26/07 – Sky’s share price performance in recent months has been driven less by its business performance and more by the fact it is at the centre of a bidding war between Comcast and Disney which has seen its share price rise over 50% year to date already. When the company announced its half year numbers at the beginning of this year revenues did show an increase of 5% from the year before. This was helped by productions like Game of Thrones as the business gears up to deal with the threat of Netflix and Amazon. To deal with this threat Sky signed a content partnership with rival BT, at the end of last year to deal with these threats to its market share. The entry of Amazon into streaming Premier League games from the beginning of the 2019 season would appear to bear these concerns out. A tie-up with Disney will certainly help in terms of content, and for the moment this would appear to be the preferred option, as investors look at the longevity of the overall business model. Sky management have a big decision to make, do they go for the best bid or take a longer term look in terms of their suitor. If they go with Comcast they will be backing the most complained about company in the US or do they go with Disney which has a better reputation. Whichever way they go, Sky customers could well pay with higher prices, or worse customer service, or both

ITV H1 – 25/07 – when Carolyn McCall left Easyjet, she may well have felt that turning ITV around would probably be an easier job than turning a budget airline into a household name. This may prove to be easier said than done and the sharp fall in profits that we saw at the beginning of the year will only have made her realise the extent of the job she has taken on. A sharp fall in advertising saw its revenues decline to £1.5bn. Once again it was ITV Studios that picked up the slack with a range of programmes from Broadchurch to Love Island that allowed it to push its total revenues up by 2%. Management will be hoping that the World Cup will go to some way to boosting advertising in the first half of this year, however even here the company could miss out if the so called ITV curse on England games caused people to switch off. The big concern for ITV is that its programming budget is tiny when compared to its rivals, and there is a worry that in order to compete margins could get hit further. Its online offering isn’t great either, the ITV Hub being clunky and not particularly easy to navigate in terms of ease of use.

Facebook - Q2 – 25/07 – despite the fallout from the Cambridge Analytica privacy scandal earlier this year Facebook was still able to post record revenues of $12bn in its Q1 update a 50% increase from the same period last year. Over the past three months it has become increasingly apparent to a lot of people that the quid pro quo for accessing Facebook services has been that the company had been collecting a lot more data than had been previously realised, including details of a user’s browsing history even after the web page had been closed down. With the advent of the European GDPR directive along with an acknowledgment that the company needed to do more to assuage concerns about user privacy there is a distinct possibility that we could see a delayed reaction given some of the negative publicity over CEO Mark Zuckerberg’s interactions with US and EU politicians. A slide in users and revenues could see a sharp reversal in the fortunes of the share price which up until now has proved to be fairly resilient to the company’s recent woes.

Amazon – Q2 – 26/07 – the recent acquisition of a small portion of Premier League football rights from the 2019 season, has seen Amazon continue to break into new markets as it accelerates its advance into new areas for content and revolutionises the retail landscape. A doubling of profits in Q1 this year, along with price rises in its US markets certainly helped, while its foray into food and healthcare are only just getting started. Revenues rose to $51bn in Q1 with the prospect that Q2 could well see an even better performance, despite the technical problems that marked last week’s Prime Day, as subscribers for Prime moved above the 100m mark at the end of the last quarter. The company has also announced its intention to launch its own smart TV with inbuilt Freeview tuner in order to take on Sky in the pay TV market.

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